Harmony Gold Mining

Harmony Gold Mining (South Africa, NYSE:HMY; JSE:HAR) is the fifth largest gold producer in the world, with operations and projects in South Africa, Senegal, Australia and Papua New Guinea. The Hidden Valley Project in PGN comprises the Hidden Valley/Kaveroi and Hamata open pits, a 43 million tonne tailings facility and associated infrastructure, the mine will produce approximately 300,000 oz of gold and 4 million oz of silver over a 10-year life.The Golpu copper gold project in the Morobe Province of Papua New Guinea, resource stands at 163 million tonnes at 1,1% Cu, 0,6 g/t Au and 132 parts per million molybdenum containing 3,9 billion pounds of copper, 2,96 million oz of gold and 47 million pounds of molybdenum. Harmony has announced plans to dispose of less profitable mines and assets for sale include its South African Kalgold open pit mine and its Australian mines. Harmony aggregates its Free State operations into total resources of 94,5-million oz and the mines in its Freegold operation have total resources of 111,5-million oz, including surface stockpiles. Harmony's Target mine has total gold resources of 92-million oz. Harmony’s gold output fell to 2.334 million oz in 2007 from 2.387 million oz the year before. Cash operating costs shot up by 27% because of increased input costs and decreased production. Exploration activities at Evander South and Target North were slowed down, and activities in Senegal and West Africa suspended in October, 2007. Harmony spent R1.17bn on its five growth projects, half of which went on Hidden Valley in Papa New Guinea. The projects are designed to lift Harmony’s output to 3.1 million oz by 2011.
Harmony Gold announced in November, 2007, that it had agreed to sell its Australian Mount Magnet operations to ASX-listed junior Monarch Gold for A$65-million, or nearly R400-million, as part of its 2007 rationalisation strategy.

Harmony sells uranium asset stake for $252m (Mining Weekly)
By: Reuters
Published: 19 Dec 07 - 13:47

Harmony Gold has sold a 60% stake of a new company it formed to house uranium assets for $252-million to Africa's biggest private equity fund, Pamodzi Resources Fund, Harmony said on Wednesday.

Harmony said it had launched the venture to take advantage of buoyant uranium prices and would retain a 40% stake in the new company, which it said may be listed in the future.

The world's fifth biggest gold producer said cash from the sale would be used for capital expenditure and to pay off debt.

South Africa's Harmony wants to revive production of uranium -- which is used to fuel nuclear reactors -- as a by-product of gold mining and valued the new, unnamed firm at $420 million.

Graham Briggs, Harmony's acting chief executive, said the new company would seek funds to build a uranium plant with an output of 500,000 tonnes of ore a month and a new gold waste site at a cost of about 1.7 billion rand.

The plant would produce 185,000 pounds of uranium yellow-cake a month or 2.2 million pounds a year, at a cash cost estimated at $30-35 per pound. The yellow-cake would be exported, and there were no immediate plans for it to be enriched in South Africa, Briggs said.

"It (the deal) crystallises out uranium assets and puts money into Harmony's pockets to support its existing capital projects," Briggs told a teleconference.

Harmony said the new uranium company's output would be 2 percent of the world's total uranium production.

Using 2006 output figures, the new firm would rank ninth in global output after Canadian miner Uranium One, Harmony said on its Web site.

The new company would also eclipse the world's third largest gold producer AngloGold Ashanti's uranium output, and become the largest black-owned South African uranium producer.

Pamodzi, which has U.S.-based backers and a war chest of $1.3 billion in funds available for investment, is a prominent black-owned investment group focused on the resource sector. The uranium deal is its first since its creation in August.

"We are confident that energy demand will multiply in the next few years, and we see a number of nuclear plants coming up in South Africa, China, Russia and elsewhere," Gerard Kemp, Pamodzi's chief investment officer, told Reuters.

He said Pamodzi was keen to invest in coal, iron ore and platinum ventures in the future. Pamodzi is supported by a consortium of U.S. investors including affiliates of American Metals & Coal International, Inc. (AMCI) -- a leading international energy and resources sector investor.

The new uranium firm will operate the Cooke Section of Harmony's Randfontein mine, 35 km (22 miles) south-west of Johannesburg.

The deal would also give a new lease of life to the uranium and gold assets at Cooke, Harmony said, noting a sharp increase in the uranium spot price over the past four years from about $10 per pound to a spot price around $90 per pound.

Harmony's gold resources of 30 million ounces would rise to 40 million ounces, including its uranium resources of about 108 million pounds, which were 10 million ounces of gold equivalent resources, he said.
Harmony's rivals, AngloGold and Gold Fields, are also seeking ways to cash in on a bull market for uranium.

Edited by: Creamer Media Reporter

New Harmony CEO plots future
Allan Seccombe (MiningMx)
Posted: Wed, 02 Jan 2008

[miningmx.com] -- HARMONY Gold is charting a new course as it looks to cut costs, restructure its assets, bring in a partner on its Papua New Guinea projects and repay two large debts over the next couple of years, newly appointed CEO Graham Briggs said on Wednesday.

Briggs was appointed caretaker CEO of the world’s fifth-largest gold producer in August after the sudden resignation of Bernard Swanepoel, the man largely seen by the market as the driving force behind the creation of the company from a single mine.

News of Swanepoel’s departure knocked billions of rands off Harmony’s market capitalisation within the hour.
we have got caught in big capital expenditure
Briggs, who headed Harmony’s Australian operations and appointed group CEO with effect from 1 January 2008, says it is going to take time to complete the restructuring of the company’s mines and restore them to profitability.

Part of the restructuring is the decision on what to do with the marginal mines, which have generally underperformed in a record rand gold price environment.

“The first and biggest challenge is to put in place a strategy for the company going forward. We have a mixture of assets and some great challenges, like costs,” Briggs told Miningmx in an interview.

“The marginal assets should, with these gold prices, be generating good profits, but because of our lack of cost controls, that’s not happening,” he said.

The marginal assets could either be farmed out to other smaller producers or sold, as Harmony has done with the Orkney mines in a deal with Pamodzi Gold, separately list them or keep them within the group to turn them back into cash generators.

“A lot of those assets have great potential going forward, but we have got caught in big capital expenditure in the last couple of years and in the future. We therefore cannot afford to spend capital on the poorer assets,” Briggs said.

Harmony spent R1.2bn on five growth projects in financial 2007 and foresees group capital expenditure of R3.8bn in financial 2008.

“Those assets are by no mean no-hopers. In the right hands -- and those could be our hands -- they can be good money spinners. It’s just the timing of when we spend capital on them is not great.”

Speculation has run rife in recent years that Harmony will house its marginal mines in a separate company and list it, giving shareholders the choice of investing in high-quality mines or the more marginal plays, which should be strong cash generators in a high gold price environment.

Asked specifically about the separate listing option, Briggs said, “It could certainly happen and it’s one of the options. But where do you call the split? A lot of these are interdependent locally, so that’s something you’d have to look at.”

Harmony’s five growth projects will lift gold production to 3.1 million oz by 2011. Harmony expects gold output in 2008 to be less than the 2.334 million ounces generated in 2007.

The strategy will have to take into account the timeframe to bring production to account from the growth assets because some of the marginal, short- to medium-life mines are supporting those projects.

In Papua New Guinea, Harmony has drawn up a shortlist of five potential partners for the Hidden Valley and Wafi/Golpu projects, whittling the list down from more than 20 before the year-end.

“We hope to introduce the partner by the end of the first quarter of 2008,” Briggs said.

“We are not going to sell our Papua New Guinea assets. The strategy behind the partnering is that we want to grow in that region but we can’t afford all the capital to get the full benefit from all these projects.”

The undeveloped Wafi/Golpu copper porphyry faces expenditure of $100m on a feasibility study and a further $1bn to build a mine. Harmony is looking for a partner that could reduce capital expenditure and possibly revisit the planned mining methods.

While Harmony doesn’t need to come to the market this year for its capital expenditure, the picture is likely to change. Harmony needs to repay a bank loan of R2bn at the end of calendar 2008 and in May 2009 there is a convertible issue for about R1.7bn.

“These are crunch years and we need to get our act right before then,” Briggs said. One of the options to settle this heavy demand on its cash could be a rights issue.

Harmony is realising some R1.6bn from vending its Randfontein uranium assets into a new company in which it will hold 40%. The money will go towards the growth projects as well as repaying debt.

“We are at the moment focussing more on properly structuring our operations. It takes a long time to turn these ships around,” he said. Harmony is decentralising services and it has asked for voluntary retrenchments.

Harmony switches offshore strategy
Allan Seccombe
Posted: Tue, 15 Jan 2008

[miningmx.com] -- HARMONY GOLD will actively hunt for acquisitions in South East Asia once it has fully disposed of its Australian mines, the newly appointed MD of Harmony’s international arm, Johannes van Heerden, said on Tuesday.

As part of portfolio restructure, it must find a partner for its multi-billion rand Papua New Guinea (PNG) projects, he said.

Harmony plans to produce 500,000 oz of gold from its international division, which so far, includes just PNG, by 2012. Van Heerden said bringing in a partner to equally share the Hidden Valley and Wafi/Golpu projects in PNG would still leave it on track for that target.

“Buying in reserves will help us get to our target of 500,000 oz,” Van Heerden said during a visit to Harmony’s PNG projects.

Harmony will soon be hosting site visits to the remote and geographically challenging sites after it whittled down a list of potential partners to five.

The gold, copper, silver, molybdenum and zinc deposits lie on the same mineralised belt that stretches southeast from neighbouring Indonesia, home of the Grasberg mine, and includes the Ok Tedi, Porgera and Tolukuma gold mines.

Harmony isn’t naming companies courting Harmony for a role in the PNG projects but analysts speculate they could include Barrick Gold, Newmont, AngloGold Ashanti and possibly even one of the major diversified resources companies.

“No partner has been selected yet and we won’t have selected someone in the next week or month. By June 2008 we will have concluded the transaction in its entirety,” van Heerden said.

Hidden Valley

Harmony is constructing the Hidden Valley project, which is expected to pour gold in March 2009 and ramp up to full production of 280,000 oz by June.

The capital cost to build a mine and plant at the predominantly copper deposit at Golpu is estimated at $1.3bn, the Wafi gold project will add another $500m, while a bankable feasibility study on the two neighbouring prospects will cost $120m. It’s the kind of money Harmony just doesn’t have and can’t raise, Briggs said.

The reason for the large capital spend at Golpu is the current mine plan to use the block cave method, which requires capital to be spent up front, as well as the need to sink a decline shaft as part of the feasibility study.

Harmony has already spent R1.3bn in PNG over the past two years and needs a further R1.2bn between January and June of this year.

Harmony wants Wafi to be a 350,000 equivalent oz mine by 2012, something van Heerden admits is a “very tight target”.

By bringing in a partner, Harmony’s capital expenditure on the projects could come to nil depending on the financing arrangements to bring in the other company.

“If, for example, the partner farms into the projects, they’d have to put in, say, $450m over a few years for 50%. Then our capex would drop to zero,” said Harmony CEO Graham Briggs.

Harmony finances

Harmony’s financial models from the June 2008 year end are modelled on the company not paying any more towards PNG, he added.

Money will be diverted into further exploration of the eight tenements, outside the one mining lease, and more land coming in from five more exploration applications in the Morobe province of PNG. “We have more exploration targets here than we can fund,” van Heerden said.

Free cash will also go towards three South African growth projects, which have their highest capital demand this year and next, Briggs said.

In the 2008 financial year to end-June, the capital budget is R3.8bn, dropping to R1.8bn in the next and then down to R800m a year after that, said acting financial director Frank Abbott.

Harmony has agreed to sell its Mount Magnet and South Kal mines in Australia, and the ownership transfer of the mines has yet to be completely finalised.

Harmony needs to clear the decks of these two transactions before it can look from its regional offices in Brisbane for further growth in South East Asia, pushing its output higher with the acquisition of a project that can produce 200,000 oz or more.

It is unlikely to be a large acquisition, given the current gold price making such a transaction too expensive. Harmony is looking at a possible joint venture with a junior company, for example.

Harmony mine passes milestones

Posted: Fri, 18 Jan 2008

[miningmx.com] -- HARMONY Gold is creating a number of firsts at its Hidden Valley mining project in the deep jungle of Papua New Guinea (PNG).

The project, which begins production in March 2009 and is set to reach full production in June, will be the first major opencast mine in PNG for at least 15 years and it is the first to pass the new environmental act. Unlike its peers in PNG, Harmony is the first since the failed attempt by Ok Tedi, more than a decade ago, to build major tailings dams. Other miners dump their tailings into rivers or into the sea, aggravating communities and environmentalists. The A$489m mine will produce 3.4 million oz of gold and 49 million oz of silver over its 13 year life according to the feasibility study based on current reserves as well as expectations that the Karevoi ore body will generate between 800,000 and one million oz of reserves from the latest drilling programme. At current prices, the payback is expected to be three years.
Low cost

“Hidden Valley is going to be a great, low-cost, safe mine. It’s open pit, international and this all adds up for Harmony. It’s going to generate money,” said CEO Graham Briggs. The drilling programme at Hidden Valley will result in an upward revision in the reserves statement in June this year, and Hidden Valley’s mining manager Brennan Lang said there will be a “dramatic increase” in reserves. Using a conservative silver price of $8/oz, the by-product credit from the metal brings cash costs at Hidden Valley down to an average $246 from the $362 it would be without it. The current silver price at around $16 will bring costs down further, making it the lowest cost producer in PNG where costs run at $250 or more, Briggs said. This project and the exploration prospect at the Wafi/Golpu polymetal copper and gold deposit has caught the attention of other companies, which have applied to partner Harmony is its PNG ventures.
Seeking partner

Another constraint is the lack of tailing dam space near the project. Harmony is seeking a partner on the nearly $2bn Wafi/Golpu project because it doesn’t have the cash and the partner will join it on Hidden Valley and all its other exploration plays. The companies to have made the short list of five are thought to include Barrick Gold, which is aggressively growing its presence in PNG and could be the forerunner in the race to be Harmony’s 50% partner, Newmont, Newcrest and AngloGold Ashanti. Harmony has undertaken a marvel of engineering at Hidden Valley, which at its highest point is 2,800 metres above sea level, lying atop a range of steep sided, cloud-covered hills in the middle of tropical jungle, winning praise from hardbitten analysts. “This is extremely impressive. It’s an awesome project,” said David Davis, a gold analyst from Credit Suisse Standard Securities who visited the site two and a half years ago, when a tiny camp had been carved out of the jungle. In the space of two years, Harmony has built a A$20m, 40km road through the hills and valleys to the mine; all the on-site roads; accommodation for 2,000 people, and over-burden stripping. It has also prepared platforms or level ground for processing plant; ore stockpiles and tailings dumps. “The infrastructure surrounding the mine is robust given that real estate is at a premium in the valleys and peaks of the area,” Davis said. The 4.2 million tonne per annum processing plant can possibly be squeezed to handle another 10% of material, but that is the maximum because the lack of space on the platform for any major additions. The two planned dams can handle 42 million tonnes, but Harmony has a longer-term scheme to build another tailings dump. It will hold up to 70 million tonnes, some 20km away, and involves tunnels and pumping. It will also allow it to seek out and exploit high-grade satellite pits. The metallurgical plant has been designed to cater for a number of types of gold mineralisation which includes sulphitic material, manganese and haematite present in the Hidden Valley, Kaveroi and the nearby Hamata ore body. “This mixture will be blended prior to processing, but could present some problems in the commissioning phase,” Davis said. Hidden Valley and Kaveroi are open at depth and are thought to join down dip underground. The ore bodies will be mined in a single pit while exploration will explore the coalescence of the deposits.

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